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Social preferences and skill segregation

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  • Antonio Cabrales
  • Antoni Calvó

Abstract

This paper shows that models where preferences of individuals depend not only on their allocations, but also on the well-being of other persons, can produce both large and testable effects. We study the allocation of workers with heterogeneous productivities to firms. We show that even small deviations from purely “selfish” preferences leads to widespread workplace skill segregation. That is, workers of different abilities tend to work in di¤erent firms, as long as they care somewhat more about the utilities of workers who are “close”.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 629.

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Date of creation: Jul 2002
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Handle: RePEc:upf:upfgen:629

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Contract theory; mechanism design; envy; social preferences; skill segregation;

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References

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  1. Benabou, Roland, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 619-52, August.
  2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
  3. Fershtman, C. & Weiss, Y. & Hvide, H.K., 2001. "Status Concerns and the Organization of Work," Papers 2001-2, Tel Aviv.
  4. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Bolton, Gary E, 1991. "A Comparative Model of Bargaining: Theory and Evidence," American Economic Review, American Economic Association, vol. 81(5), pages 1096-136, December.
  6. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  7. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  8. Saint-Paul, Gilles, 1999. "On the Distribution of Income and Worker Assignment under Intra-Firm Spillovers, with an Application to Ideas And Networks," CEPR Discussion Papers 2290, C.E.P.R. Discussion Papers.
  9. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
  10. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
  11. Ernst Fehr & Klaus M. Schmidt, . "Theories of Fairness and Reciprocity - Evidence and Economic Applications," IEW - Working Papers 075, Institute for Empirical Research in Economics - University of Zurich.
  12. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
  13. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
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Citations

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Cited by:
  1. Pedro Rey Biel, 2004. "Inequity aversion and team incentives," Microeconomics 0407009, EconWPA.
  2. Judith Hellerstein & David Neumark, 2005. "Workplace Segregation in the United States: Race, Ethnicity, and Skill," NBER Working Papers 11599, National Bureau of Economic Research, Inc.
  3. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2007. "An experiment on markets and contracts : do social preferences determine corporate culture?," Economics Working Papers we072010, Universidad Carlos III, Departamento de Economía.
  4. Luiz Dias Bahia & Danilo Coelho & Alexandre Messa Silva & Sergei Soares, 2009. "A Evolução da Segregação por Qualificação Profissional ao Nível das Firmas," Discussion Papers 1406, Instituto de Pesquisa Econômica Aplicada - IPEA.
  5. Pedro Rey Biel, 2005. "Equilibrium Play and Best Response in Sequential Constant Sum Games," Experimental 0506004, EconWPA.

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